Correlation Between Melia Hotels and Commcenter

Can any of the company-specific risk be diversified away by investing in both Melia Hotels and Commcenter at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Melia Hotels and Commcenter into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Melia Hotels and Commcenter SA, you can compare the effects of market volatilities on Melia Hotels and Commcenter and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Melia Hotels with a short position of Commcenter. Check out your portfolio center. Please also check ongoing floating volatility patterns of Melia Hotels and Commcenter.

Diversification Opportunities for Melia Hotels and Commcenter

-0.49

Correlation Coefficient

Melia Hotels  Commcenter

Very good diversification

The 3 months correlation between Melia and Commcenter is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Melia Hotels and Commcenter SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commcenter SA and Melia Hotels is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Melia Hotels are associated (or correlated) with Commcenter. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Commcenter SA has no effect on the direction of Melia Hotels i.e., Melia Hotels and Commcenter go up and down completely randomly.

Pair Corralation between Melia Hotels and Commcenter

Assuming the 90 days trading horizon Melia Hotels is expected to generate 4.97 times more return on investment than Commcenter. However, Melia Hotels is 4.97 times more volatile than Commcenter SA. It trades about 0.24 of its potential returns per unit of risk. Commcenter SA is currently generating about 0.15 per unit of risk. If you would invest  610.00  in Melia Hotels on April 24, 2025 and sell it today you would earn a total of  151.00  from holding Melia Hotels or generate 24.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	71.43%
Values	Daily Returns

Melia Hotels  vs.  Commcenter SA

Melia Hotels

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Melia Hotels are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady essential indicators, Melia Hotels exhibited solid returns over the last few months and may actually be approaching a breakup point.

Commcenter SA

Risk-Adjusted Performance

Good

Over the last 90 days Commcenter SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound primary indicators, Commcenter is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Melia Hotels and Commcenter

The main advantage of trading using opposite Melia Hotels and Commcenter positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Melia Hotels position performs unexpectedly, Commcenter can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Commcenter will offset losses from the drop in Commcenter's long position.

The idea behind Melia Hotels and Commcenter SA pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..